Latest Earnings Release

Stewart Reports Results for the Second Quarter 2017

Net income attributable to Stewart of $18.6 million, compared to a net income of $23.6 million in the prior year quarter

Total title revenues increased $3.6 million, or 1 percent, from prior year quarter

Total commercial revenues of $51.4 million, up 14 percent from prior year quarter

Total employee and other operating expenses decreased $10.8 million, or 5 percent, from prior year quarter

Acquired retail operations of Title365 in June, expanding direct operations in western U.S.

HOUSTON, July 20, 2017 -- Stewart Information Services Corporation (NYSE-STC) today reported net income attributable to Stewart of $18.6 million ($0.79 per diluted share) for the second quarter 2017 compared to net income attributable to Stewart of $23.6 million ($0.49 per diluted share, see further discussion below) for the second quarter 2016. Pretax income before noncontrolling interests for the second quarter 2017 was $33.1 million compared to pretax income before noncontrolling interests of $41.9 million for the second quarter 2016. Of note, the second quarter 2016 results include a $5.4 million net policy loss reserve reduction. Excluding this reduction, the second quarter 2016 pretax income before noncontrolling interests and net income attributable to Stewart were $36.5 million and $20.2 million, respectively. In addition, for purposes of calculating second quarter 2016’s net income per share, net income was reduced by a $12.0 million cash consideration paid in connection with the Class B share exchange. Excluding this payment, net income per diluted share would have been $1.00 (or $0.86 per diluted share excluding the net policy loss reserve reduction) for the second quarter 2016, as compared to $0.79 per diluted share for the second quarter 2017.

As of June 2, 2017, Stewart acquired the retail branch division of Title365 Company. Title365’s retail division operates primarily in Southern California. This asset acquisition reinforces Stewart’s commitment to providing innovative title solutions and focused, smart growth in key markets throughout the United States, as more than 250 employees and 15 Title365 offices are now operating under the Stewart name.

“We are very pleased that the Title365 retail team has joined the Stewart family,” noted Matthew W. Morris, chief executive officer. “As a result of this acquisition, Stewart gains experienced leadership and scale in several high-growth target markets, and the team from Title365 will benefit from our global reach, financial strength and extensive resources. This acquisition aligns with our strategic plan for targeted growth in our direct operations.”

“Our commercial operations delivered an exceptional quarter, validating our strategy to strengthen our balance sheet and invest in growing our commercial presence,” continued Morris. “Buoyed by another excellent quarter in Canada, international operations continue to be a strong contributor to overall results.”

“While our retail operations were affected by the loss of certain staff and management we initially referenced last quarter, we made several strategic hires and continue to aggressively recruit to rebuild and improve the affected markets. By the end of the fourth quarter 2017, we expect new hires along with the Title365 acquisition to largely offset short term revenue loss from the departures. This acquisition and our new hires underscore Stewart’s commitment to investing in the long term future of the company by improving our operating model, targeting growth opportunities and driving a culture of excellence,” concluded Morris.

Selected Financial Information

Summary results of operations are as follows (dollars in millions, except per share amounts):

Second Quarter

Six Months

2017

2016

2017

2016

Total revenues

485.5

489.4

928.5

927.7

Pretax income before noncontrolling interests

33.1

41.9

39.0

26.2

Income tax

11.0

14.4

10.9

7.7

Net income attributable to Stewart

18.6

23.6

22.7

12.4

Net income per diluted share attributable to Stewart(1)

0.79

0.49

0.96

0.02

(1) As previously reported, during the second quarter 2016, the Company paid a $12.0 million cash consideration to the holders of our Class B Common Stock as part of the exchange agreement announced during that quarter. Excluding this cash payment, the adjusted net income per diluted share for the second quarter and first six months of 2016 was $1.00 and $0.53, respectively. Under U.S. GAAP, the $12.0 million payment was recorded as a reduction to retained earnings, similar to a preferred stock dividend, and did not reduce the net income attributable to Stewart. However, the payment reduced the net income used in the calculation of basic and diluted earnings per share.

Title Segment

Summary results of the title segment are as follows (dollars in millions, except pretax margin):

Three months ended June 30,

2017

2016

% Change

Total revenues

470.4

467.5

1%

Pretax income

39.5

51.3

(23)%

Pretax margin

8.4%

11.0%

As noted above, the second quarter 2016 results included a $5.4 million net policy loss reserve reduction which resulted from favorable policy loss experience. Excluding this credit, the segment’s second quarter 2017 pretax income would have declined 14 percent from pretax income of $45.9 million (9.8 percent margin) in the second quarter 2016.

Direct revenue information is presented below (dollars in millions):

Three months ended June 30,

2017

2016

% Change

Commercial:

Domestic

46.5

39.9

17%

International

4.9

5.2

(6)%

Non-commercial:

Domestic

153.1

167.4

(9)%

International

27.2

24.5

11%

Total direct revenues

231.7

237.0

(2)%

Non-commercial domestic revenue includes revenues from purchase transactions and centralized title operations. Revenues from purchase transactions decreased 7 percent in the second quarter 2017 compared to the prior year quarter, while revenues from our centralized title operations, which primarily process refinancing and default title orders, declined 24 percent due primarily to decreased refinancing transactions. Total international revenues increased 8 percent in the second quarter 2017 compared to the prior year quarter, mainly due to transaction volume growth from our Canada and U.K. operations, partially offset by the effect of a stronger U.S. dollar against the Canadian dollar and British pound. Revenues from independent agency operations in the second quarter 2017 increased 4 percent compared to the second quarter 2016. The independent agency remittance rate decreased to 17.9 percent in the second quarter 2017 from 18.6 percent in the second quarter 2016 due to the geographic mix of our agency business; second quarter 2017 revenues from independent agencies, net of retention, were $41.8 million, similar to the prior year quarter.

Ancillary Services and Corporate Segment

Summary results of the ancillary services and corporate segment are as follows (dollars in millions):

Three months ended June 30

2017

2016

% Change

Total revenues

15.0

21.9

(32)%

Pretax loss

(6.3)

(9.4)

33%

The decline in the segment’s revenues in the second quarter 2017 compared to the prior year quarter was primarily due to the divestitures of the loan file review, quality control services and government services lines of business at the end of 2016.

The segment’s pretax results improved to a $6.3 million pretax loss, compared to a pretax loss of $9.4 million in the prior year quarter. This was driven by a $9.2 million, or 32 percent, decrease in the segment’s total employee costs and other operating expenses, more than offsetting the revenue decline during the second quarter. The segment’s results for the second quarter 2017 and 2016 included approximately $6 million and $7 million, respectively, of expenses attributable to parent company and corporate operations.

Expenses

As a result of ongoing cost management efforts, a reduction in employee counts tied to volume declines (primarily in our ancillary services and centralized title operations), and the aforementioned staff departures in direct operations, employee costs for the second quarter 2017 decreased $13.1 million, or 9 percent, from the second quarter 2016. Average employee counts for the second quarter 2017 decreased approximately 9 percent from the second quarter 2016. As a percentage of total operating revenues, employee costs for the second quarter 2017 were 29.0 percent, an improvement of 250 basis points compared to 31.5 percent in the prior year quarter.

Other operating expenses for the second quarter 2017 increased $2.3 million, or 3 percent, from the second quarter 2016 primarily as a result of increased outside search fees, driven by higher commercial and international revenues noted above. As a percentage of total operating revenues, other operating expenses for the second quarter 2017 were 18.5 percent, compared to 17.9 percent in the second quarter 2016.

Title losses were 5.2 percent of title revenues in the second quarter 2017 compared to 3.7 percent in the second quarter 2016; excluding the $5.4 million net policy loss reserve reduction mentioned above, the title loss ratio in the second quarter 2016 was 4.9 percent. Title loss expense increased to $24.5 million in the second quarter 2017, compared to $17.2 million (or $22.6 million after adjusting for the policy loss reserve reduction) in the second quarter 2016. The total estimated liability for title losses was $465.3 million at June 30, 2017.

Depreciation and amortization expenses decreased to $6.4 million in the second quarter 2017 compared to $7.3 million in the second quarter 2016, primarily due to lower amortization expense in the current year quarter resulting from the disposal of certain intangible assets in connection with the divestitures of several lines of the ancillary services business during 2016.

Other

Net cash provided by operations in the second quarter 2017 totaled $35.7 million, compared to $50.3 million in the second quarter 2016. The decline was primarily due to the lower net income generated during the second quarter 2017 and lower collections on accounts receivable.

Second quarter Earnings Call

Stewart will hold a conference call to discuss the second quarter 2017 earnings at 8:30 a.m. Eastern Time on Thursday, July 20, 2017. To participate, dial (866) 952-8559 (USA) and (785) 424-1881 (International) - access code STCQ217. Additionally, participants can listen to the conference call through Stewart’s Investor Relations website at www.stewart.com/en/investor-relations/earnings-call.html. The conference call replay will be available from 10:00 a.m. Eastern Time on July 20, 2017 until midnight on July 27, 2017, by dialing (800) 839-5130 (USA) or (402) 220-2693 (International) - the access code is also STCQ217.

About Stewart

Stewart Information Services Corporation (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage industry, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we believe in building strong relationships – and these partnerships are the cornerstone of every closing, every transaction and every deal. Stewart. Real partners. Real possibilities.™ More information is available at the Company’s website at stewart.com, or you can subscribe to the Stewart blog at blog.stewart.com, or follow Stewart on Twitter® @stewarttitleco.

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the impact of vetting our agency operations for quality and profitability; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this news release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

STEWART INFORMATION SERVICES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands of dollars, except per share amounts and except where noted)

Three months ended
June 30,

Six months ended
June 30,

2017

2016

2017

2016

Revenues:

Title revenues:

Direct operations

231,662

237,017

419,091

423,018

Agency operations

234,407

225,416

467,756

450,051

Ancillary services

15,118

21,182

32,422

43,217

Total operating revenues

481,187

483,615

919,269

916,286

Investment income

4,941

4,856

9,613

9,926

Investment and other (losses) gains - net

(676)

966

(389)

1,454

485,452

489,437

928,493

927,666

Expenses:

Amounts retained by agencies

192,558

183,485

383,733

367,329

Employee costs

139,346

152,427

279,131

302,636

Other operating expenses

88,786

86,458

167,103

174,168

Title losses and related claims

24,462

17,153

45,163

40,247

Depreciation and amortization

6,441

7,340

12,819

15,646

Interest

712

661

1,529

1,440

452,305

447,524

889,478

901,466

Income before taxes and noncontrolling interests

33,147

41,913

39,015

26,200

Income tax

10,993

14,386

10,850

7,738

Net income

22,154

27,527

28,165

18,462

Less net income attributable to noncontrolling interests

3,586

3,928

5,508

6,058

Net income attributable to Stewart

18,568

23,599

22,657

12,404

Net earnings per diluted share attributable to Stewart

0.79

0.49

0.96

0.02

Diluted average shares outstanding (000)

23,620

23,559

23,613

23,542

Selected financial information:

Net cash provided by operations

35,720

50,300

16,531

18,459

Other comprehensive income

3,465

4,364

6,890

13,384

Monthly Order Counts:

Opened Orders 2017:

Apr

May

Jun

Total

Closed Orders 2017:

Apr

May

Jun

Total

Commercial

3,205

3,817

3,766

10,788

Commercial

2,385

2,777

3,005

8,167

Purchase

21,461

23,127

23,235

67,823

Purchase

15,225

17,790

19,347

52,362

Refi

7,231

7,552

9,400

24,183

Refi

4,945

5,209

6,144

16,298

Other

1,522

1,595

1,306

4,423

Other

1,055

1,432

1,648

4,135

Total

33,419

36,091

37,707

107,217

Total

23,610

27,208

30,144

80,962

Opened Orders 2016:

Apr

May

Jun

Total

Closed Orders 2016:

Apr

May

Jun

Total

Commercial

4,014

3,848

4,275

12,137

Commercial

2,757

2,634

3,186

8,577

Purchase

23,926

23,525

23,978

71,429

Purchase

16,805

18,026

19,352

54,183

Refi

12,235

12,267

12,999

37,501

Refi

8,340

8,218

8,854

25,412

Other

1,035

996

1,131

3,162

Other

1,313

1,433

1,919

4,665

Total

41,210

40,636

42,383

124,229

Total

29,215

30,311

33,311

92,837

STEWART INFORMATION SERVICES CORPORATION

CONDENSED BALANCE SHEETS

(In thousands of dollars)

June 30, 2017 (Unaudited)

December 31, 2016

Assets:

Cash and cash equivalents

147,205

185,772

Short-term investments

23,092

22,239

Investments in debt and equity securities available-for-sale, at fair value

654,762

631,503

Receivables – premiums from agencies

34,603

31,246

Receivables – other

54,948

50,177

Allowance for uncollectible amounts

(9,108)

(9,647)

Property and equipment, net

70,119

70,506

Title plants, at cost

75,313

75,313

Goodwill

234,667

217,094

Intangible assets, net of amortization

9,317

10,890

Deferred tax assets

3,865

3,860

Other assets

59,261

52,771

1,358,044

1,341,724

Liabilities:

Notes payable

116,331

106,808

Accounts payable and accrued liabilities

97,095

115,640

Estimated title losses

465,294

462,572

Deferred tax liabilities

12,947

7,856

691,667

692,876

Stockholders' equity:

Common Stock and additional paid-in capital

183,350

180,959

Retained earnings

479,860

471,788

Accumulated other comprehensive loss

(1,991)

(8,881)

Treasury stock

(2,666)

(2,666)

Stockholders’ equity attributable to Stewart

658,553

641,200

Noncontrolling interests

7,824

7,648

Total stockholders' equity

666,377

648,848

1,358,044

1,341,724

Number of shares outstanding (000)

23,737

23,431

Book value per share

28.07

27.69

STEWART INFORMATION SERVICES CORPORATION

SEGMENT INFORMATION

(In thousands of dollars)

Three months ended:

June 30, 2017

June 30, 2016

Title

Ancillary Services and Corporate

Consolidated

Title

Ancillary Services and Corporate

Consolidated

Revenues:

Operating revenues

466,045

15,142

481,187

462,244

21,371

483,615

Investment income

4,941

-

4,941

4,856

-

4,856

Investment and other (losses) gains - net

(537)

(139)

(676)

408

558

966

470,449

15,003

485,452

467,508

21,929

489,437

Expenses:

Amounts retained by agencies

192,558

-

192,558

183,485

-

183,485

Employee costs

130,197

9,149

139,346

136,778

15,649

152,427

Other operating expenses

78,442

10,344

88,786

73,432

13,026

86,458

Title losses and related claims

24,462

-

24,462

17,153

-

17,153

Depreciation and amortization

5,321

1,120

6,441

5,364

1,976

7,340

Interest

2

710

712

-

661

661

430,982

21,323

452,305

416,212

31,312

447,524

Income (loss) before taxes

39,467

(6,320)

33,147

51,296

(9,383)

41,913

Six months ended:

June 30, 2017

June 30, 2016

Title

Ancillary Services and Corporate

Consolidated

Title

Ancillary Services and Corporate

Consolidated

Revenues:

Operating revenues

886,760

32,509

919,269

872,725

43,561

916,286

Investment income

9,613

-

9,613

9,926

-

9,926

Investment and other (losses) gains - net

(127)

(262)

(389)

(1,604)

3,058

1,454

896,246

32,247

928,493

881,047

46,619

927,666

Expenses:

Amounts retained by agencies

383,733

-

383,733

367,329

-

367,329

Employee costs

258,357

20,774

279,131

267,808

34,828

302,636

Other operating expenses

146,697

20,406

167,103

144,465

29,703

174,168

Title losses and related claims

45,163

-

45,163

40,247

-

40,247

Depreciation and amortization

10,547

2,272

12,819

10,522

5,124

15,646

Interest

5

1,524

1,529

-

1,440

1,440

844,502

44,976

889,478

830,371

71,095

901,466

Income (loss) before taxes

51,744

(12,729)

39,015

50,676

(24,476)

26,200

Appendix A

Adjusted revenues and adjusted EBITDA

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for any net realized gains and losses and (2) net income after earnings from noncontrolling interests and before interest expense, income tax expense, and depreciation and amortization and adjusted for net realized gains and losses, certain significant litigation expenses and non-operating costs such as severance, consulting and third-party provider transition costs, component exit-related costs and prior policy year reserve adjustments (adjusted EBITDA). Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2017 and 2016 (dollars in millions).

Three Months Ended

June 30,

Six Months Ended

June 30,

2017

2016

% Change

2017

2016

% Change

Revenues

485.5

489.4

928.5

927.7

Less: Net realized losses (gains)

0.7

(1.0)

0.4

(1.5)

Adjusted revenues

486.2

488.4

(1)%

928.9

926.2

0%

Net income attributable to Stewart

18.6

23.6

22.7

12.4

Noncontrolling interests

3.6

3.9

5.5

6.1

Income taxes

11.0

14.4

10.9

7.7

Income before taxes and noncontrolling interests

33.2

41.9

39.1

26.2

Litigation expense

-

-

-

3.6

Other non-operating charges*

-

-

-

2.6

Prior policy year reserve adjustments, net

-

(5.4)

-

(5.4)

Net realized losses (gains)

0.7

(1.0)

0.4

(1.5)

Adjusted income before taxes and noncontrolling interests

33.9

35.5

39.5

25.5

Depreciation and amortization

6.4

7.3

12.8

15.6

Interest expense

0.7

0.7

1.5

1.4

Adjusted EBITDA

41.0

43.5

(6)%

53.8

42.5

27%

*Excludes non-operating accelerated depreciation charges of $1.1 million for the six months ended June 30, 2016 as they were already included within the Depreciation and amortization line.

Stewart Reports Results for the First Quarter 2017

HOUSTON, April 20, 2017 /PRNewswire/ --

Net income attributable to Stewart of $4.1 million, compared to a net loss of $11.2 million in the prior year quarter

Total pretax margin improved 490 basis points from prior year quarter

Total title revenues increased $10.1 million, or 2.5 percent, from prior year quarter

Total commercial revenues of $46.0 million, up 7.7 percent from prior year quarter

Total operating expenses decreased $16.8 million, or 3.7 percent from prior year quarter

Title segment pretax income increased $12.9 million from prior year quarter

Stewart Information Services Corporation (NYSE:STC) today reported net income attributable to Stewart of $4.1 million ($0.17 per diluted share) for the first quarter 2017 compared to a net loss attributable to Stewart of $11.2 million ($0.48 per diluted share) for the first quarter 2016. First quarter 2017 results included a $1.7 million ($0.07 per diluted share) net income tax benefit related to previously unrecognized tax credits.

Pretax income before noncontrolling interests for the first quarter 2017 was $5.9 million compared to a pretax loss before noncontrolling interests of $15.7 million for the first quarter 2016.

First quarter 2016 results included:

$2.8 million of charges recorded in the ancillary services and corporate segment relating to our exit of the delinquent loan servicing operations (including a $1.3 million realized loss associated with early lease termination costs),

$2.2 million of expenses recorded in the ancillary services and corporate segment associated primarily with a life insurance settlement with a former Class B shareholder,

$3.6 million of litigation-related accrual recorded in the ancillary services and corporate segment, and

$1.8 million of other net realized gains composed of $3.8 million of net realized gains recorded within the ancillary services and corporate segment, offset by $2.0 million of net realized losses recorded within the title segment.

"We are pleased with our first quarter results, and encouraged by the solid foundation we have set for the remainder of the year," said Matthew W. Morris, chief executive officer. "We reported pretax income of $6 million, an approximately $22 million improvement on operating revenue growth of $5 million when compared to the prior year quarter. Employee and other operating costs declined almost $20 million due to our ongoing cost discipline as well as the actions taken in 2016 to focus on our core title operations. Gains in operational efficiency were achieved in both the title segment and ancillary services and corporate segment, with pretax margins improving solidly from the prior year's first quarter. We remain focused on generating core title revenue growth in target markets and are investing as necessary in initiatives to that end. We believe that smart revenue growth coupled with further production cost efficiency will yield sustainable margin improvement."

Selected Financial InformationSummary results of operations are as follows (dollars in millions, except per share amounts):

Three months ended March 31

2017

2016

Total revenues

443.0

438.2

Pretax income (loss) before noncontrolling interests

5.9

(15.7)

Income tax (benefit)

(0.1)

(6.6)

Net income (loss) attributable to Stewart

4.1

(11.2)

Net income (loss) per diluted share attributable to Stewart

0.17

(0.48)

Title SegmentSummary results of the title segment are as follows (dollars in millions, except pretax margin):

Three months ended March 31

2017

2016

% Change

Total revenues

425.8

413.5

3.0%

Pretax income (loss)

12.3

(0.6)

2,086.4%

Pretax margin

2.9%

(0.1)%

The first quarter 2017 results included $0.4 million of net realized gains, compared with $2.0 million of net realized losses during the first quarter 2016, primarily related to additional contingent consideration expenses in connection with a prior year acquisition.

"First quarters are traditionally the weakest of the year for the title industry, and we are encouraged with the progress achieved by our title segment, which generated a $13 million pretax income improvement relative to title revenue growth of $10 million over the prior year quarter," continued Morris. "Revenues in our direct operations grew 1 percent, driven by our commercial and international operations, while revenues from independent agencies grew 4 percent. We continued to benefit from our emphasis on prudent underwriting and risk management, with the first quarter's title loss ratio just below 5 percent, while employee and other operating costs declined 8 percent. We expect to continue seeing modest but sustainable volume and price increases in existing and new home sales driven largely by demographics and the emerging millennial homebuyers, which will further enhance margins going forward."

Direct revenue information is presented below (dollars in millions):

Three months ended March 31

2017

2016

% Change

Commercial:

Domestic

41.6

38.7

7.5%

International

4.4

4.0

10.0%

Non-commercial:

Domestic

123.1

128.5

(4.2)%

International

18.3

14.8

23.6%

Total direct revenues

187.4

186.0

0.8%

Non-commercial domestic revenue includes revenues from purchase transactions and centralized title operations. Revenues from purchase transactions decreased 2.2 percent in the first quarter 2017 compared to the prior year quarter, while centralized revenues declined 17.6 percent, primarily due to decreased refinancing transactions. Total international revenues increased 20.7 percent in the first quarter 2017 compared to the prior year quarter, mainly due to transaction volume growth from our Canada operations. Revenues from independent agency operations in the first quarter 2017 increased 3.9 percent compared to the first quarter 2016. The independent agency remittance rate was 18.1 percent in the first quarter 2017 compared to 18.2 percent in the first quarter 2016; while revenues from independent agencies, net of retention, increased 3.4 percent from the prior year quarter.

Ancillary Services and Corporate SegmentSummary results of the ancillary services and corporate segment are as follows (dollars in millions):

Three months ended March 31

2017

2016

% Change

Total operating revenues

17.4

22.2

(21.7)%

Pretax loss

(6.4)

(15.1)

57.5%

The decline in the segment's operating revenues in the first quarter 2017 compared to the prior year quarter was primarily due to our exit of the delinquent loan servicing operations completed in the first quarter 2016 and the divestitures of the loan file review, quality control services and government services lines of business at the end of 2016.

The first quarter 2016 results included $2.5 million of net realized gains (composed primarily of a $3.6 million gain due to a reduction in estimated contingent consideration associated with a prior year acquisition, offset by $1.3 million of early lease termination costs related to our exit of the delinquent loan servicing operations) and $7.3 million of other charges (as detailed in the Expenses section below), for a total of $4.8 million of net charges.

ExpensesExpense comparisons for the first quarter 2017 to the prior year quarter included first quarter 2016 charges, recorded in the ancillary services and corporate segment, consisting of:

$3.6 million of litigation-related accrual,

$2.2 million of expenses associated primarily with a life insurance settlement with a former Class B shareholder, and

$1.5 million of depreciation and severance expenses related to our exit of the delinquent loan servicing operations.

As a result of ongoing cost management efforts, as well as a reduction in employee counts tied to volume declines, primarily in our ancillary services operations, employee costs for the first quarter 2017 decreased $10.4 million, or 6.9 percent, from the first quarter 2016. Average employee counts for the first quarter 2017 decreased approximately 9.1 percent from the first quarter 2016. As a percentage of total operating revenues, employee costs for the first quarter 2017 were 31.9 percent, an improvement of 280 basis points compared to 34.7 percent in the prior year quarter.

Other operating expenses for the first quarter 2017 decreased $9.4 million, or 10.7 percent, from the first quarter 2016. As a percentage of total operating revenues, other operating expenses for the first quarter 2017 were 17.9 percent, compared to 20.3 percent in the first quarter 2016. Excluding the non-operating charges discussed above, the other operating expenses ratio in the first quarter 2016 was 18.9 percent.

As a percentage of title revenues, title losses were 4.9 percent in the first quarter 2017 compared to 5.6 percent in the first quarter 2016. Title loss expense decreased to $20.7 million in the first quarter 2017 compared to $23.1 million in the first quarter 2016. The title loss ratio in any given quarter can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. The total estimated liability for title losses was $460.1 million at March 31, 2017.

Depreciation and amortization expenses decreased to $6.4 million in the first quarter 2017 compared to $8.3 million in the first quarter 2016, primarily due to the higher depreciation expense recorded in the first quarter 2016 resulting from accelerated depreciation charges relating to our exit from the delinquent loan servicing operations, and the lower amortization expense in the first quarter 2017 as a result of the disposal of certain intangible assets in connection with the divestitures of several lines of the ancillary services business.

OtherCash flows from operations improved in the first quarter 2017 with net cash used by operations of $19.2 million compared to $31.8 million net cash used in the first quarter 2016. The improvement was primarily due to the net income generated during the first quarter 2017, offset by higher payments of claims.

First Quarter Earnings CallStewart will hold a conference call to discuss the first quarter 2017 earnings at 8:30 a.m. Eastern Time on Thursday, April 20, 2017. To participate, dial (888) 632-3384 (USA) and (785) 424-1675 (International) - access code STCQ117. Additionally, participants can listen to the conference call through Stewart's Investor Relations website at www.stewart.com/en/investor-relations/earnings-call.html. The conference call replay will be available from 10:00 a.m. Eastern Time on April 20, 2017 until midnight on April 27, 2017, by dialing (800) 839-2459 (USA) or (402) 220-7218 (International) - the access code is also STCQ117.

About StewartStewart Information Services Corporation (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage industry, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we believe in building strong relationships – and these partnerships are the cornerstone of every closing, every transaction and every deal. Stewart. Real partners. Real possibilities.™ More information is available at the Company's website at stewart.com, or you can subscribe to the Stewart blog at blog.stewart.com, or follow Stewart on Twitter® @stewarttitleco.

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the impact of vetting our agency operations for quality and profitability; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this news release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for any net realized gains and losses and (2) net income after earnings from noncontrolling interests and before interest expense, income tax expense, and depreciation and amortization and adjusted for net realized gains and losses, certain significant litigation expenses and non-operating costs such as severance, consulting and third-party provider transition costs, component exit-related costs and prior policy year reserve adjustments (adjusted EBITDA). Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2017 and 2016 (dollars in millions).

Quarter Ended

March 31,

2017

2016

% Change

Revenues

443.0

438.2

Less: Net realized gains

(0.3)

(0.5)

Adjusted revenues

442.7

437.7

1.1%

Net income (loss) attributable to Stewart

4.1

(11.2)

Noncontrolling interests

1.9

2.1

Income taxes

(0.1)

(6.6)

Income (loss) before taxes and noncontrolling interests

5.9

(15.7)

Litigation expense

-

3.6

Other non-operating charges*

-

2.6

Net realized gains

(0.3)

(0.5)

Adjusted income (loss) before taxes and noncontrolling interests

5.6

(10.0)

Depreciation and amortization

6.4

8.3

Interest expense

0.8

0.8

Adjusted EBITDA

12.8

(0.9)

1,522.2%

*Excludes non-operating accelerated depreciation charges of $1.1 million for the quarter ended March 31, 2016 as they were already included within the Depreciation and amortization line.

Stewart Reports Results for the First Quarter 2017

HOUSTON, April 20, 2017 /PRNewswire/ --

Net income attributable to Stewart of $4.1 million, compared to a net loss of $11.2 million in the prior year quarter

Total pretax margin improved 490 basis points from prior year quarter

Total title revenues increased $10.1 million, or 2.5 percent, from prior year quarter

Total commercial revenues of $46.0 million, up 7.7 percent from prior year quarter

Total operating expenses decreased $16.8 million, or 3.7 percent from prior year quarter

Title segment pretax income increased $12.9 million from prior year quarter

Stewart Information Services Corporation (NYSE:STC) today reported net income attributable to Stewart of $4.1 million ($0.17 per diluted share) for the first quarter 2017 compared to a net loss attributable to Stewart of $11.2 million ($0.48 per diluted share) for the first quarter 2016. First quarter 2017 results included a $1.7 million ($0.07 per diluted share) net income tax benefit related to previously unrecognized tax credits.

Pretax income before noncontrolling interests for the first quarter 2017 was $5.9 million compared to a pretax loss before noncontrolling interests of $15.7 million for the first quarter 2016.

First quarter 2016 results included:

$2.8 million of charges recorded in the ancillary services and corporate segment relating to our exit of the delinquent loan servicing operations (including a $1.3 million realized loss associated with early lease termination costs),

$2.2 million of expenses recorded in the ancillary services and corporate segment associated primarily with a life insurance settlement with a former Class B shareholder,

$3.6 million of litigation-related accrual recorded in the ancillary services and corporate segment, and

$1.8 million of other net realized gains composed of $3.8 million of net realized gains recorded within the ancillary services and corporate segment, offset by $2.0 million of net realized losses recorded within the title segment.

"We are pleased with our first quarter results, and encouraged by the solid foundation we have set for the remainder of the year," said Matthew W. Morris, chief executive officer. "We reported pretax income of $6 million, an approximately $22 million improvement on operating revenue growth of $5 million when compared to the prior year quarter. Employee and other operating costs declined almost $20 million due to our ongoing cost discipline as well as the actions taken in 2016 to focus on our core title operations. Gains in operational efficiency were achieved in both the title segment and ancillary services and corporate segment, with pretax margins improving solidly from the prior year's first quarter. We remain focused on generating core title revenue growth in target markets and are investing as necessary in initiatives to that end. We believe that smart revenue growth coupled with further production cost efficiency will yield sustainable margin improvement."

Selected Financial InformationSummary results of operations are as follows (dollars in millions, except per share amounts):

Three months ended March 31

2017

2016

Total revenues

443.0

438.2

Pretax income (loss) before noncontrolling interests

5.9

(15.7)

Income tax (benefit)

(0.1)

(6.6)

Net income (loss) attributable to Stewart

4.1

(11.2)

Net income (loss) per diluted share attributable to Stewart

0.17

(0.48)

Title SegmentSummary results of the title segment are as follows (dollars in millions, except pretax margin):

Three months ended March 31

2017

2016

% Change

Total revenues

425.8

413.5

3.0%

Pretax income (loss)

12.3

(0.6)

2,086.4%

Pretax margin

2.9%

(0.1)%

The first quarter 2017 results included $0.4 million of net realized gains, compared with $2.0 million of net realized losses during the first quarter 2016, primarily related to additional contingent consideration expenses in connection with a prior year acquisition.

"First quarters are traditionally the weakest of the year for the title industry, and we are encouraged with the progress achieved by our title segment, which generated a $13 million pretax income improvement relative to title revenue growth of $10 million over the prior year quarter," continued Morris. "Revenues in our direct operations grew 1 percent, driven by our commercial and international operations, while revenues from independent agencies grew 4 percent. We continued to benefit from our emphasis on prudent underwriting and risk management, with the first quarter's title loss ratio just below 5 percent, while employee and other operating costs declined 8 percent. We expect to continue seeing modest but sustainable volume and price increases in existing and new home sales driven largely by demographics and the emerging millennial homebuyers, which will further enhance margins going forward."

Direct revenue information is presented below (dollars in millions):

Three months ended March 31

2017

2016

% Change

Commercial:

Domestic

41.6

38.7

7.5%

International

4.4

4.0

10.0%

Non-commercial:

Domestic

123.1

128.5

(4.2)%

International

18.3

14.8

23.6%

Total direct revenues

187.4

186.0

0.8%

Non-commercial domestic revenue includes revenues from purchase transactions and centralized title operations. Revenues from purchase transactions decreased 2.2 percent in the first quarter 2017 compared to the prior year quarter, while centralized revenues declined 17.6 percent, primarily due to decreased refinancing transactions. Total international revenues increased 20.7 percent in the first quarter 2017 compared to the prior year quarter, mainly due to transaction volume growth from our Canada operations. Revenues from independent agency operations in the first quarter 2017 increased 3.9 percent compared to the first quarter 2016. The independent agency remittance rate was 18.1 percent in the first quarter 2017 compared to 18.2 percent in the first quarter 2016; while revenues from independent agencies, net of retention, increased 3.4 percent from the prior year quarter.

Ancillary Services and Corporate SegmentSummary results of the ancillary services and corporate segment are as follows (dollars in millions):

Three months ended March 31

2017

2016

% Change

Total operating revenues

17.4

22.2

(21.7)%

Pretax loss

(6.4)

(15.1)

57.5%

The decline in the segment's operating revenues in the first quarter 2017 compared to the prior year quarter was primarily due to our exit of the delinquent loan servicing operations completed in the first quarter 2016 and the divestitures of the loan file review, quality control services and government services lines of business at the end of 2016.

The first quarter 2016 results included $2.5 million of net realized gains (composed primarily of a $3.6 million gain due to a reduction in estimated contingent consideration associated with a prior year acquisition, offset by $1.3 million of early lease termination costs related to our exit of the delinquent loan servicing operations) and $7.3 million of other charges (as detailed in the Expenses section below), for a total of $4.8 million of net charges.

ExpensesExpense comparisons for the first quarter 2017 to the prior year quarter included first quarter 2016 charges, recorded in the ancillary services and corporate segment, consisting of:

$3.6 million of litigation-related accrual,

$2.2 million of expenses associated primarily with a life insurance settlement with a former Class B shareholder, and

$1.5 million of depreciation and severance expenses related to our exit of the delinquent loan servicing operations.

As a result of ongoing cost management efforts, as well as a reduction in employee counts tied to volume declines, primarily in our ancillary services operations, employee costs for the first quarter 2017 decreased $10.4 million, or 6.9 percent, from the first quarter 2016. Average employee counts for the first quarter 2017 decreased approximately 9.1 percent from the first quarter 2016. As a percentage of total operating revenues, employee costs for the first quarter 2017 were 31.9 percent, an improvement of 280 basis points compared to 34.7 percent in the prior year quarter.

Other operating expenses for the first quarter 2017 decreased $9.4 million, or 10.7 percent, from the first quarter 2016. As a percentage of total operating revenues, other operating expenses for the first quarter 2017 were 17.9 percent, compared to 20.3 percent in the first quarter 2016. Excluding the non-operating charges discussed above, the other operating expenses ratio in the first quarter 2016 was 18.9 percent.

As a percentage of title revenues, title losses were 4.9 percent in the first quarter 2017 compared to 5.6 percent in the first quarter 2016. Title loss expense decreased to $20.7 million in the first quarter 2017 compared to $23.1 million in the first quarter 2016. The title loss ratio in any given quarter can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. The total estimated liability for title losses was $460.1 million at March 31, 2017.

Depreciation and amortization expenses decreased to $6.4 million in the first quarter 2017 compared to $8.3 million in the first quarter 2016, primarily due to the higher depreciation expense recorded in the first quarter 2016 resulting from accelerated depreciation charges relating to our exit from the delinquent loan servicing operations, and the lower amortization expense in the first quarter 2017 as a result of the disposal of certain intangible assets in connection with the divestitures of several lines of the ancillary services business.

OtherCash flows from operations improved in the first quarter 2017 with net cash used by operations of $19.2 million compared to $31.8 million net cash used in the first quarter 2016. The improvement was primarily due to the net income generated during the first quarter 2017, offset by higher payments of claims.

First Quarter Earnings CallStewart will hold a conference call to discuss the first quarter 2017 earnings at 8:30 a.m. Eastern Time on Thursday, April 20, 2017. To participate, dial (888) 632-3384 (USA) and (785) 424-1675 (International) - access code STCQ117. Additionally, participants can listen to the conference call through Stewart's Investor Relations website at www.stewart.com/en/investor-relations/earnings-call.html. The conference call replay will be available from 10:00 a.m. Eastern Time on April 20, 2017 until midnight on April 27, 2017, by dialing (800) 839-2459 (USA) or (402) 220-7218 (International) - the access code is also STCQ117.

About StewartStewart Information Services Corporation (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage industry, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we believe in building strong relationships – and these partnerships are the cornerstone of every closing, every transaction and every deal. Stewart. Real partners. Real possibilities.™ More information is available at the Company's website at stewart.com, or you can subscribe to the Stewart blog at blog.stewart.com, or follow Stewart on Twitter® @stewarttitleco.

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the impact of vetting our agency operations for quality and profitability; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this news release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for any net realized gains and losses and (2) net income after earnings from noncontrolling interests and before interest expense, income tax expense, and depreciation and amortization and adjusted for net realized gains and losses, certain significant litigation expenses and non-operating costs such as severance, consulting and third-party provider transition costs, component exit-related costs and prior policy year reserve adjustments (adjusted EBITDA). Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2017 and 2016 (dollars in millions).

Quarter Ended

March 31,

2017

2016

% Change

Revenues

443.0

438.2

Less: Net realized gains

(0.3)

(0.5)

Adjusted revenues

442.7

437.7

1.1%

Net income (loss) attributable to Stewart

4.1

(11.2)

Noncontrolling interests

1.9

2.1

Income taxes

(0.1)

(6.6)

Income (loss) before taxes and noncontrolling interests

5.9

(15.7)

Litigation expense

-

3.6

Other non-operating charges*

-

2.6

Net realized gains

(0.3)

(0.5)

Adjusted income (loss) before taxes and noncontrolling interests

5.6

(10.0)

Depreciation and amortization

6.4

8.3

Interest expense

0.8

0.8

Adjusted EBITDA

12.8

(0.9)

1,522.2%

*Excludes non-operating accelerated depreciation charges of $1.1 million for the quarter ended March 31, 2016 as they were already included within the Depreciation and amortization line.

Stewart Reports Results for the First Quarter 2017

HOUSTON, April 20, 2017 /PRNewswire/ --

Net income attributable to Stewart of $4.1 million, compared to a net loss of $11.2 million in the prior year quarter

Total pretax margin improved 490 basis points from prior year quarter

Total title revenues increased $10.1 million, or 2.5 percent, from prior year quarter

Total commercial revenues of $46.0 million, up 7.7 percent from prior year quarter

Total operating expenses decreased $16.8 million, or 3.7 percent from prior year quarter

Title segment pretax income increased $12.9 million from prior year quarter

Stewart Information Services Corporation (NYSE:STC) today reported net income attributable to Stewart of $4.1 million ($0.17 per diluted share) for the first quarter 2017 compared to a net loss attributable to Stewart of $11.2 million ($0.48 per diluted share) for the first quarter 2016. First quarter 2017 results included a $1.7 million ($0.07 per diluted share) net income tax benefit related to previously unrecognized tax credits.

Pretax income before noncontrolling interests for the first quarter 2017 was $5.9 million compared to a pretax loss before noncontrolling interests of $15.7 million for the first quarter 2016.

First quarter 2016 results included:

$2.8 million of charges recorded in the ancillary services and corporate segment relating to our exit of the delinquent loan servicing operations (including a $1.3 million realized loss associated with early lease termination costs),

$2.2 million of expenses recorded in the ancillary services and corporate segment associated primarily with a life insurance settlement with a former Class B shareholder,

$3.6 million of litigation-related accrual recorded in the ancillary services and corporate segment, and

$1.8 million of other net realized gains composed of $3.8 million of net realized gains recorded within the ancillary services and corporate segment, offset by $2.0 million of net realized losses recorded within the title segment.

"We are pleased with our first quarter results, and encouraged by the solid foundation we have set for the remainder of the year," said Matthew W. Morris, chief executive officer. "We reported pretax income of $6 million, an approximately $22 million improvement on operating revenue growth of $5 million when compared to the prior year quarter. Employee and other operating costs declined almost $20 million due to our ongoing cost discipline as well as the actions taken in 2016 to focus on our core title operations. Gains in operational efficiency were achieved in both the title segment and ancillary services and corporate segment, with pretax margins improving solidly from the prior year's first quarter. We remain focused on generating core title revenue growth in target markets and are investing as necessary in initiatives to that end. We believe that smart revenue growth coupled with further production cost efficiency will yield sustainable margin improvement."

Selected Financial InformationSummary results of operations are as follows (dollars in millions, except per share amounts):

Three months ended March 31

2017

2016

Total revenues

443.0

438.2

Pretax income (loss) before noncontrolling interests

5.9

(15.7)

Income tax (benefit)

(0.1)

(6.6)

Net income (loss) attributable to Stewart

4.1

(11.2)

Net income (loss) per diluted share attributable to Stewart

0.17

(0.48)

Title SegmentSummary results of the title segment are as follows (dollars in millions, except pretax margin):

Three months ended March 31

2017

2016

% Change

Total revenues

425.8

413.5

3.0%

Pretax income (loss)

12.3

(0.6)

2,086.4%

Pretax margin

2.9%

(0.1)%

The first quarter 2017 results included $0.4 million of net realized gains, compared with $2.0 million of net realized losses during the first quarter 2016, primarily related to additional contingent consideration expenses in connection with a prior year acquisition.

"First quarters are traditionally the weakest of the year for the title industry, and we are encouraged with the progress achieved by our title segment, which generated a $13 million pretax income improvement relative to title revenue growth of $10 million over the prior year quarter," continued Morris. "Revenues in our direct operations grew 1 percent, driven by our commercial and international operations, while revenues from independent agencies grew 4 percent. We continued to benefit from our emphasis on prudent underwriting and risk management, with the first quarter's title loss ratio just below 5 percent, while employee and other operating costs declined 8 percent. We expect to continue seeing modest but sustainable volume and price increases in existing and new home sales driven largely by demographics and the emerging millennial homebuyers, which will further enhance margins going forward."

Direct revenue information is presented below (dollars in millions):

Three months ended March 31

2017

2016

% Change

Commercial:

Domestic

41.6

38.7

7.5%

International

4.4

4.0

10.0%

Non-commercial:

Domestic

123.1

128.5

(4.2)%

International

18.3

14.8

23.6%

Total direct revenues

187.4

186.0

0.8%

Non-commercial domestic revenue includes revenues from purchase transactions and centralized title operations. Revenues from purchase transactions decreased 2.2 percent in the first quarter 2017 compared to the prior year quarter, while centralized revenues declined 17.6 percent, primarily due to decreased refinancing transactions. Total international revenues increased 20.7 percent in the first quarter 2017 compared to the prior year quarter, mainly due to transaction volume growth from our Canada operations. Revenues from independent agency operations in the first quarter 2017 increased 3.9 percent compared to the first quarter 2016. The independent agency remittance rate was 18.1 percent in the first quarter 2017 compared to 18.2 percent in the first quarter 2016; while revenues from independent agencies, net of retention, increased 3.4 percent from the prior year quarter.

Ancillary Services and Corporate SegmentSummary results of the ancillary services and corporate segment are as follows (dollars in millions):

Three months ended March 31

2017

2016

% Change

Total operating revenues

17.4

22.2

(21.7)%

Pretax loss

(6.4)

(15.1)

57.5%

The decline in the segment's operating revenues in the first quarter 2017 compared to the prior year quarter was primarily due to our exit of the delinquent loan servicing operations completed in the first quarter 2016 and the divestitures of the loan file review, quality control services and government services lines of business at the end of 2016.

The first quarter 2016 results included $2.5 million of net realized gains (composed primarily of a $3.6 million gain due to a reduction in estimated contingent consideration associated with a prior year acquisition, offset by $1.3 million of early lease termination costs related to our exit of the delinquent loan servicing operations) and $7.3 million of other charges (as detailed in the Expenses section below), for a total of $4.8 million of net charges.

ExpensesExpense comparisons for the first quarter 2017 to the prior year quarter included first quarter 2016 charges, recorded in the ancillary services and corporate segment, consisting of:

$3.6 million of litigation-related accrual,

$2.2 million of expenses associated primarily with a life insurance settlement with a former Class B shareholder, and

$1.5 million of depreciation and severance expenses related to our exit of the delinquent loan servicing operations.

As a result of ongoing cost management efforts, as well as a reduction in employee counts tied to volume declines, primarily in our ancillary services operations, employee costs for the first quarter 2017 decreased $10.4 million, or 6.9 percent, from the first quarter 2016. Average employee counts for the first quarter 2017 decreased approximately 9.1 percent from the first quarter 2016. As a percentage of total operating revenues, employee costs for the first quarter 2017 were 31.9 percent, an improvement of 280 basis points compared to 34.7 percent in the prior year quarter.

Other operating expenses for the first quarter 2017 decreased $9.4 million, or 10.7 percent, from the first quarter 2016. As a percentage of total operating revenues, other operating expenses for the first quarter 2017 were 17.9 percent, compared to 20.3 percent in the first quarter 2016. Excluding the non-operating charges discussed above, the other operating expenses ratio in the first quarter 2016 was 18.9 percent.

As a percentage of title revenues, title losses were 4.9 percent in the first quarter 2017 compared to 5.6 percent in the first quarter 2016. Title loss expense decreased to $20.7 million in the first quarter 2017 compared to $23.1 million in the first quarter 2016. The title loss ratio in any given quarter can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. The total estimated liability for title losses was $460.1 million at March 31, 2017.

Depreciation and amortization expenses decreased to $6.4 million in the first quarter 2017 compared to $8.3 million in the first quarter 2016, primarily due to the higher depreciation expense recorded in the first quarter 2016 resulting from accelerated depreciation charges relating to our exit from the delinquent loan servicing operations, and the lower amortization expense in the first quarter 2017 as a result of the disposal of certain intangible assets in connection with the divestitures of several lines of the ancillary services business.

OtherCash flows from operations improved in the first quarter 2017 with net cash used by operations of $19.2 million compared to $31.8 million net cash used in the first quarter 2016. The improvement was primarily due to the net income generated during the first quarter 2017, offset by higher payments of claims.

First Quarter Earnings CallStewart will hold a conference call to discuss the first quarter 2017 earnings at 8:30 a.m. Eastern Time on Thursday, April 20, 2017. To participate, dial (888) 632-3384 (USA) and (785) 424-1675 (International) - access code STCQ117. Additionally, participants can listen to the conference call through Stewart's Investor Relations website at www.stewart.com/en/investor-relations/earnings-call.html. The conference call replay will be available from 10:00 a.m. Eastern Time on April 20, 2017 until midnight on April 27, 2017, by dialing (800) 839-2459 (USA) or (402) 220-7218 (International) - the access code is also STCQ117.

About StewartStewart Information Services Corporation (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage industry, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we believe in building strong relationships – and these partnerships are the cornerstone of every closing, every transaction and every deal. Stewart. Real partners. Real possibilities.™ More information is available at the Company's website at stewart.com, or you can subscribe to the Stewart blog at blog.stewart.com, or follow Stewart on Twitter® @stewarttitleco.

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the impact of vetting our agency operations for quality and profitability; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this news release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for any net realized gains and losses and (2) net income after earnings from noncontrolling interests and before interest expense, income tax expense, and depreciation and amortization and adjusted for net realized gains and losses, certain significant litigation expenses and non-operating costs such as severance, consulting and third-party provider transition costs, component exit-related costs and prior policy year reserve adjustments (adjusted EBITDA). Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2017 and 2016 (dollars in millions).

Quarter Ended

March 31,

2017

2016

% Change

Revenues

443.0

438.2

Less: Net realized gains

(0.3)

(0.5)

Adjusted revenues

442.7

437.7

1.1%

Net income (loss) attributable to Stewart

4.1

(11.2)

Noncontrolling interests

1.9

2.1

Income taxes

(0.1)

(6.6)

Income (loss) before taxes and noncontrolling interests

5.9

(15.7)

Litigation expense

-

3.6

Other non-operating charges*

-

2.6

Net realized gains

(0.3)

(0.5)

Adjusted income (loss) before taxes and noncontrolling interests

5.6

(10.0)

Depreciation and amortization

6.4

8.3

Interest expense

0.8

0.8

Adjusted EBITDA

12.8

(0.9)

1,522.2%

*Excludes non-operating accelerated depreciation charges of $1.1 million for the quarter ended March 31, 2016 as they were already included within the Depreciation and amortization line.

Stewart Reports Results for the First Quarter 2017

HOUSTON, April 20, 2017 /PRNewswire/ --

Net income attributable to Stewart of $4.1 million, compared to a net loss of $11.2 million in the prior year quarter

Total pretax margin improved 490 basis points from prior year quarter

Total title revenues increased $10.1 million, or 2.5 percent, from prior year quarter

Total commercial revenues of $46.0 million, up 7.7 percent from prior year quarter

Total operating expenses decreased $16.8 million, or 3.7 percent from prior year quarter

Title segment pretax income increased $12.9 million from prior year quarter

Stewart Information Services Corporation (NYSE:STC) today reported net income attributable to Stewart of $4.1 million ($0.17 per diluted share) for the first quarter 2017 compared to a net loss attributable to Stewart of $11.2 million ($0.48 per diluted share) for the first quarter 2016. First quarter 2017 results included a $1.7 million ($0.07 per diluted share) net income tax benefit related to previously unrecognized tax credits.

Pretax income before noncontrolling interests for the first quarter 2017 was $5.9 million compared to a pretax loss before noncontrolling interests of $15.7 million for the first quarter 2016.

First quarter 2016 results included:

$2.8 million of charges recorded in the ancillary services and corporate segment relating to our exit of the delinquent loan servicing operations (including a $1.3 million realized loss associated with early lease termination costs),

$2.2 million of expenses recorded in the ancillary services and corporate segment associated primarily with a life insurance settlement with a former Class B shareholder,

$3.6 million of litigation-related accrual recorded in the ancillary services and corporate segment, and

$1.8 million of other net realized gains composed of $3.8 million of net realized gains recorded within the ancillary services and corporate segment, offset by $2.0 million of net realized losses recorded within the title segment.

"We are pleased with our first quarter results, and encouraged by the solid foundation we have set for the remainder of the year," said Matthew W. Morris, chief executive officer. "We reported pretax income of $6 million, an approximately $22 million improvement on operating revenue growth of $5 million when compared to the prior year quarter. Employee and other operating costs declined almost $20 million due to our ongoing cost discipline as well as the actions taken in 2016 to focus on our core title operations. Gains in operational efficiency were achieved in both the title segment and ancillary services and corporate segment, with pretax margins improving solidly from the prior year's first quarter. We remain focused on generating core title revenue growth in target markets and are investing as necessary in initiatives to that end. We believe that smart revenue growth coupled with further production cost efficiency will yield sustainable margin improvement."

Selected Financial InformationSummary results of operations are as follows (dollars in millions, except per share amounts):

Three months ended March 31

2017

2016

Total revenues

443.0

438.2

Pretax income (loss) before noncontrolling interests

5.9

(15.7)

Income tax (benefit)

(0.1)

(6.6)

Net income (loss) attributable to Stewart

4.1

(11.2)

Net income (loss) per diluted share attributable to Stewart

0.17

(0.48)

Title SegmentSummary results of the title segment are as follows (dollars in millions, except pretax margin):

Three months ended March 31

2017

2016

% Change

Total revenues

425.8

413.5

3.0%

Pretax income (loss)

12.3

(0.6)

2,086.4%

Pretax margin

2.9%

(0.1)%

The first quarter 2017 results included $0.4 million of net realized gains, compared with $2.0 million of net realized losses during the first quarter 2016, primarily related to additional contingent consideration expenses in connection with a prior year acquisition.

"First quarters are traditionally the weakest of the year for the title industry, and we are encouraged with the progress achieved by our title segment, which generated a $13 million pretax income improvement relative to title revenue growth of $10 million over the prior year quarter," continued Morris. "Revenues in our direct operations grew 1 percent, driven by our commercial and international operations, while revenues from independent agencies grew 4 percent. We continued to benefit from our emphasis on prudent underwriting and risk management, with the first quarter's title loss ratio just below 5 percent, while employee and other operating costs declined 8 percent. We expect to continue seeing modest but sustainable volume and price increases in existing and new home sales driven largely by demographics and the emerging millennial homebuyers, which will further enhance margins going forward."

Direct revenue information is presented below (dollars in millions):

Three months ended March 31

2017

2016

% Change

Commercial:

Domestic

41.6

38.7

7.5%

International

4.4

4.0

10.0%

Non-commercial:

Domestic

123.1

128.5

(4.2)%

International

18.3

14.8

23.6%

Total direct revenues

187.4

186.0

0.8%

Non-commercial domestic revenue includes revenues from purchase transactions and centralized title operations. Revenues from purchase transactions decreased 2.2 percent in the first quarter 2017 compared to the prior year quarter, while centralized revenues declined 17.6 percent, primarily due to decreased refinancing transactions. Total international revenues increased 20.7 percent in the first quarter 2017 compared to the prior year quarter, mainly due to transaction volume growth from our Canada operations. Revenues from independent agency operations in the first quarter 2017 increased 3.9 percent compared to the first quarter 2016. The independent agency remittance rate was 18.1 percent in the first quarter 2017 compared to 18.2 percent in the first quarter 2016; while revenues from independent agencies, net of retention, increased 3.4 percent from the prior year quarter.

Ancillary Services and Corporate SegmentSummary results of the ancillary services and corporate segment are as follows (dollars in millions):

Three months ended March 31

2017

2016

% Change

Total operating revenues

17.4

22.2

(21.7)%

Pretax loss

(6.4)

(15.1)

57.5%

The decline in the segment's operating revenues in the first quarter 2017 compared to the prior year quarter was primarily due to our exit of the delinquent loan servicing operations completed in the first quarter 2016 and the divestitures of the loan file review, quality control services and government services lines of business at the end of 2016.

The first quarter 2016 results included $2.5 million of net realized gains (composed primarily of a $3.6 million gain due to a reduction in estimated contingent consideration associated with a prior year acquisition, offset by $1.3 million of early lease termination costs related to our exit of the delinquent loan servicing operations) and $7.3 million of other charges (as detailed in the Expenses section below), for a total of $4.8 million of net charges.

ExpensesExpense comparisons for the first quarter 2017 to the prior year quarter included first quarter 2016 charges, recorded in the ancillary services and corporate segment, consisting of:

$3.6 million of litigation-related accrual,

$2.2 million of expenses associated primarily with a life insurance settlement with a former Class B shareholder, and

$1.5 million of depreciation and severance expenses related to our exit of the delinquent loan servicing operations.

As a result of ongoing cost management efforts, as well as a reduction in employee counts tied to volume declines, primarily in our ancillary services operations, employee costs for the first quarter 2017 decreased $10.4 million, or 6.9 percent, from the first quarter 2016. Average employee counts for the first quarter 2017 decreased approximately 9.1 percent from the first quarter 2016. As a percentage of total operating revenues, employee costs for the first quarter 2017 were 31.9 percent, an improvement of 280 basis points compared to 34.7 percent in the prior year quarter.

Other operating expenses for the first quarter 2017 decreased $9.4 million, or 10.7 percent, from the first quarter 2016. As a percentage of total operating revenues, other operating expenses for the first quarter 2017 were 17.9 percent, compared to 20.3 percent in the first quarter 2016. Excluding the non-operating charges discussed above, the other operating expenses ratio in the first quarter 2016 was 18.9 percent.

As a percentage of title revenues, title losses were 4.9 percent in the first quarter 2017 compared to 5.6 percent in the first quarter 2016. Title loss expense decreased to $20.7 million in the first quarter 2017 compared to $23.1 million in the first quarter 2016. The title loss ratio in any given quarter can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. The total estimated liability for title losses was $460.1 million at March 31, 2017.

Depreciation and amortization expenses decreased to $6.4 million in the first quarter 2017 compared to $8.3 million in the first quarter 2016, primarily due to the higher depreciation expense recorded in the first quarter 2016 resulting from accelerated depreciation charges relating to our exit from the delinquent loan servicing operations, and the lower amortization expense in the first quarter 2017 as a result of the disposal of certain intangible assets in connection with the divestitures of several lines of the ancillary services business.

OtherCash flows from operations improved in the first quarter 2017 with net cash used by operations of $19.2 million compared to $31.8 million net cash used in the first quarter 2016. The improvement was primarily due to the net income generated during the first quarter 2017, offset by higher payments of claims.

First Quarter Earnings CallStewart will hold a conference call to discuss the first quarter 2017 earnings at 8:30 a.m. Eastern Time on Thursday, April 20, 2017. To participate, dial (888) 632-3384 (USA) and (785) 424-1675 (International) - access code STCQ117. Additionally, participants can listen to the conference call through Stewart's Investor Relations website at www.stewart.com/en/investor-relations/earnings-call.html. The conference call replay will be available from 10:00 a.m. Eastern Time on April 20, 2017 until midnight on April 27, 2017, by dialing (800) 839-2459 (USA) or (402) 220-7218 (International) - the access code is also STCQ117.

About StewartStewart Information Services Corporation (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage industry, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we believe in building strong relationships – and these partnerships are the cornerstone of every closing, every transaction and every deal. Stewart. Real partners. Real possibilities.™ More information is available at the Company's website at stewart.com, or you can subscribe to the Stewart blog at blog.stewart.com, or follow Stewart on Twitter® @stewarttitleco.

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the impact of vetting our agency operations for quality and profitability; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this news release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for any net realized gains and losses and (2) net income after earnings from noncontrolling interests and before interest expense, income tax expense, and depreciation and amortization and adjusted for net realized gains and losses, certain significant litigation expenses and non-operating costs such as severance, consulting and third-party provider transition costs, component exit-related costs and prior policy year reserve adjustments (adjusted EBITDA). Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2017 and 2016 (dollars in millions).